The costs of owning a home as a share of household income in Canada has been growing since the beginning of 2012 and the decreasing affordability trend has also continued in the second quarter of 2012. An RBC report released on August 27th explains that the national figures were dragged down by extremely poor affordability in the Vancouver-area market. According to the report, the Vancouver-area market was by far the least affordable in Canada in the second quarter of 2012 with affordability measures drawing near the worst on record.
The Vancouver market figures are alarming — especially in the detached bungalow segment, “Where the margin above the historical average in the second quarter (3.9 percentage points) would be cut by half if we were to exclude Vancouver from the national tally.“ Furthermore, the report announces that owning a single-family detached bungalow in Vancouver would absorb 91 per cent of a typical household’s pre-tax income.
Housing affordability in Vancouver should slightly improve in the next quarter according to Robert Hogue, a senior economist at RBC. “While prices have come down a bit during the lull, those decreases are not reflected in the latest RBC Economics Housing Trends and Affordability Report, released Monday, and which covers the second quarter of 2012.“ However, he continues by explaining that an interest rate hike in the first quarter of 2013 that is expected by RBC would increase the cost of owning a home in Vancouver again.
Affordability Much Less Severe in the Rest of British Columbia
The overall housing affordability in British Columbia declined for all categories in the province, with the RBC measures increasing between 0.2 percentage points and 1.2 percentage points. The deterioration of housing affordability in the second quarter of 2012 in BC largely reflects extreme lack of affordability in the Vancouver-area market. However, figures in the rest of the province weren’t that terrible. Owning a home in Victoria needs almost a half less household income share than in Vancouver. Housing activity and affordability in the province vary in different regions. The weakness in the Vancouver-area market dragged down overall home resales in British Columbia, which were flat in the rest of the province.
Vancouver Has the Least Affordable Houses in the Country
Even though home resales in Vancouver have been declining steadily since the beginning of 2011 and the market has cooled, Vancouver continues to have the least affordable houses in the country. So far this year, home resales in Vancouver have fallen 18 per cent compared to last year. This declining trend resulted in a loosened market where extremely high prices began to decrease recently. The MLS Home Price Index for Vancouver reached its top in May and has since declined on a month-to-month basis in both June and July. According to a Statistics Canada report, the new housing price index fell by 0.9 per cent in Vancouver in June 2012 compared with June 2011, while the MLS Home Price Index composite benchmark price for all residential properties in Greater Vancouver over the last 12 months grew by 0.6 per cent to $616,000 and decreased by 0.7 per cent in July 2012 compared to June 2012.
However, on a quarterly basis, home prices used in the RBC measures still increased sequentially in the second quarter, worsening affordability in the area even more. The RBC measures grew between 0.4 and 2.2 percentage points, moving slowly to the worst levels in the history of Canadian real estate.
Housing Affordability Solutions in Vancouver
Housing affordability in Vancouver is a major issue and there are several projects trying to find some affordable housing solutions. Re:Think Housing is an open competition whose main purpose is to generate ideas and stimulate discussion. Urbanists of all professions and backgrounds, architects, intern architects, designers, students, and creative thinkers from the general public have the opportunity to submit their housing solution proposals, integrating main principles including affordability, green space, public land, neighbourhood integration, community needs, financial viability, and feasibility. Submitted or winning ideas aren’t automatically implemented in policy, practice, or project, either wholly or in part, but nevertheless help to catalyze positive change.
Furthermore, the City of Vancouver has issued a Request for Expression of Interest (RFEOI), offering six city-owned sites located in the Kensington-Cedar Cottage and Killarney neighbourhoods for proposals to develop as many as 500 units of below-market rental housing. It’s part of a new program called “More Homes, More Affordability“ whose main aim is to provide below-market rental housing that will be operated through a long-term land lease from the city. Gregor Robertson, City of Vancouver Mayor, commented that “ensuring Vancouver has affordable housing is vital to building an inclusive, diverse city that supports local jobs and investment, limits sprawl, and creates opportunity for residents of all ages.“